South Korea’s steel giant Posco and battery maker Samsung SDI will build and run an cathode production facility in Chile with lithium supply guaranteed by the Chilean government, the firms announced Sunday.

The Posco and Samsung SDI consortium will make a combined investment of 57.5 billion won ($54.2 million) to set up a joint venture to start producing annually about 3,200 tons of cathode materials -- Nickel Cobalt Aluminum and Nickel Cobalt Manganese -- for electric vehicle batteries in the northern city of Mejillones of Chile from the second half of 2021.

Posco holds more shares in the joint venture, an official said. He declined to comment on numbers, citing confidentiality, while a Samsung SDI official said exact figures for the shares will be confirmed at a signing of a memorandum of understanding this month.

The Korean joint venture will be supplied with lithium, a core raw material for cathodes in batteries, by CORFO, a Chilean governmental organization for production and development based on a long-term contract.

The Korean consortium was one of three final winners of the project bidding participated by 12 global businesses from Canada, Belgium and China.

Samsung and Posco have been cooperating on the project since last June, and will continue the partnership for expansion of the cathode production capacity in Chile.

Location of Mejillones on map (Samsung SDI)

When to break ground for the new facility is still being discussed by the two companies.

The Chile production base will provide Samsung SDI with a stable supply of lithium for EV batteries in the long run, the company said.

Posco is also preparing to expand its battery business by increasing its production capacities at home and abroad. The steelmaker’s subsidiary Posco ESM is currently producing 7,000 tons of cathodes annually in Korea. And the subsidiary is scheduled to embark on a 4,600-ton worth production in China in 2020.

“The latest Chile joint venture will play a central role in stabilizing the supply of materials for EV batteries,” said Jun Young-hyun, CEO of Samsung SDI. .

Samsung SDI CEO Jun Young-hyun (Yonhap)

The global market for cathodes in lithium-ion batteries for electric cars and energy storage systems is forecast to quadruple from 210,000 tons in 2016 to 860,000 tons by 2020, according to the industry.

Due to the upbeat demand forecast, lithium prices have been nearly doubling for the last two years.